NEW YORK (TheStreet) -- Shares of Petroleo Brasileiro SA Petrobras (PBR) are slipping, down 4.82% to $8.88 in late morning trading Tuesday, after Brazil's state-run oil company announced that it will miss its 2014 oil production target, and will form a new division dedicated to compliance amid its ongoing corruption scandal, the Wall Street Journal reports.
The company said oil production output is likely to rise in a range of 5.5% to 6%, lower than its prior guidance of 7.5%, due to delays on platform deliveries and licensing processes, the Journal added.
Last Friday, two of the Brazilian oil giant's former executives were arrested as part of a broad corruption investigation, forcing the company to delay its third quarter earnings release for a month, Reuters reported.
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Analysts at Fitch Ratings said that the allegations surrounding Petrobras could hurt its new contracts with oil service companies, and that its credit quality "will deteriorate if the ongoing corruption investigation results in monetary penalties or loss of assets," the Journal noted.
Separately, TheStreet Ratings team rates PETROBRAS-PETROLEO BRASILIER as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate PETROBRAS-PETROLEO BRASILIER (PBR) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."